BUCHAREST, Feb 21 (Reuters) - Romanian state-owned hydropower producer Hidroelectrica needs to deal with 2 billion euros ($2.1 billion) of unprofitable investments before it can launch an initial public offering (IPO) this year, its manager said on Tuesday.

Romania’s largest and cheapest power producer came out of insolvency in 2016 after years of restructuring and reforms, which included cancelling bilateral contracts under which it sold the bulk of its output below market prices.

“A listing this year is feasible but only if the problem of unprofitable non-core investments is solved,” Hidroelectrica management board president Ovidiu Agliceru told reporters.

He said unprofitable investments totalling 2 billion euros needed to be either kept, scrapped or transferred.

Besides its hydropower plants, Hidroelectrica also has assets such as irrigation lines that help the agricultural sector and with water management but generate little electricity.

Investment fund Fondul Proprietatea, which is managed by Franklin Templeton Investment and is Hidroelectrica’s sole minority shareholder, values its 20 percent stake at about $700 million, implying a company value of $3.5 billion.

Oana Truta, vice president at Franklin Templeton, said the company would be worth more if it resolved its non-core asset problems and finalised professional board appointments.

Fondul has said it would like to sell part of its stake in the IPO, which would be the first public offering by a state-owned firm in Romania since 2014.

Agliceru said preliminary data showed Hidroelectrica had a net profit of 1.27 billion lei ($297 million) in 2016 and produced 17.4 terawatt hours (TWh) of power. The company plans to invest roughly 1 billion euros over five years.

The firm accounts for a little over 40 percent of the European Union state’s domestic power consumption. ($1 = 4.2832 lei) ($1 = 0.9490 euros) (Reporting by Luiza Ilie; editing by David Clarke)